PwC Malta is releasing the fifth edition of its Real Estate survey, which was carried out during Q4 of 2023. This market research exercise was carried out through an online survey which addressed the resident population of the Maltese islands. Based on the latest population statistics, the survey targeted a representative sample of the population of 384 respondents stratified by age group, with a confidence level of 95% and a margin of error of 5%. A total of 481 survey responses were collected. The survey explored current demand trends emanating from Malta’s property market customer preferences.
Key developments in the Maltese real estate industry
According to national statistical data for 2023, the number of promise of sale agreements (PoSAs) entered into by individual buyers of residential property amounted to 12,064. The number of PoSAs entered into this year exceeds that registered during 2022 (c. 11,075 PoSAs) and is equivalent to a year-on-year (YoY) increase of 9%. This suggests that 2024 could be another strong year for Malta’s real estate industry.
During 2023, the final deeds of sale involving individual buyers amounted to 11,136. This represents a decline of 15% when compared to 2022. The value of final deeds of sale amounted to €2.5 billion in 2023, which represents a decrease of 8% over the previous year. This implies that there were less final deeds of sale overall, albeit on average at a higher value per final deed of sale, suggesting an increase in property prices.
The number of active registered rental contracts, as reported by the Malta Housing Authority data stood at 54,978 at the end of June 2023, equivalent to an increase of 24% compared to the previous year. This increase is significantly higher than that registered for promise of sale agreements. The increasing number of foreign workers relocating to Malta is one of the drivers propelling rental demand. The number of foreigners employed in Malta, according to Jobsplus data, has increased at a compound annual growth rate (CAGR) of c. 17% over the period 2017-2022. Furthermore, Labour Force survey data indicates that the median national income for foreign workers in 2022 was €16,500. This suggests that a very large segment of expats working in Malta are employed in the lowest-paying jobs. Naturally, these expats typically look out for property which are rented within the price range that is in line with their available disposable income. In addition to this, in response to a Parliamentary question, data compiled by Jobsplus reveals that foreign workers spend an average of 22.09 months (1 year and 10 months) working in Malta. This indicates that such workers relocate to Malta temporarily, and are engaged into a non-permanent employment. All such factors are driving a higher demand for the rental of property, as opposed to a demand to purchase property.
The highest number of PoSAs in 2023 was registered in the central region, covering the cluster of localities of Ħamrun, Pietà, Santa Venera, L-Imsida, Birkirkara and Ħal Qormi, amounting to a total of 2,209 registered agreements. This was followed by the cluster of localities located in the Northern region, consisting of Mellieħa, San Pawl il-Baħar and Imġarr, with 1,635 registered agreements.
The Property Price Index (PPI) illustrates the changes in prices of residential properties purchased by households. The chart below shows how Malta’s PPI has been increasing steadily since 2016, both in terms of transacted prices (NSO) and in terms of advertised prices (CBM). During 2022, the PPI based on transacted prices was equivalent to 145, registering an increase of 6.7% over the previous year. The PPI based on advertised prices also registered an increase in 2022 over the previous year, amounting to 159. As at Q3 of 2023, the PPI based on transacted prices stood at 153 and the PPI based on advertised prices stood at 171. The CAGR growth from 2015 to 2022 of the property price indices based on transacted prices and on advertised prices are 5.4% and 6.8% respectively.
Results from the PwC Survey
Renting or buying residential property
When asked about plans to buy or rent residential property, the majority of respondents, 49%, answered that they have plans to buy property. The demand to rent property dropped from last year’s edition, from 31% to 11%. Moreover, the proportion of respondents that do not have any plans to buy or rent property increased from the last edition (Q4 2023: 40%; Q1 2023: 27%).
Are you making plans to buy or rent a residential property?
405 responses
481 responses
The latest survey suggests a significant shift to the cohort of respondents who have no plans to either buy or rent residential property - a suggestion that the prevailing economic conditions could be influencing investment decisions. Such an increase may be attributable to inflationary pressures which dent the purchasing power of consumers. Recent measures to curb inflation included the tightening of monetary policy where the European Central Bank (ECB) raised interest rates, hence making it more challenging for borrowers to service loans and potentially discouraging borrowers from entering into new loans. Central Bank of Malta (CBM) data indicates that there was a decline in the number of new mortgage contracts registered during the second quarter of 2023. Higher interest rates also increase costs for real estate developers, further exacerbating inflationary pressure on the prices of property.
The increase in the cohort of respondents which indicated that they have no future investment plans, contributed to the dip in demand for renting residential property as observed in this survey. The trajectory of this specific cohort, which will be under the watch of future editions of this survey, is expected to suggest meaningful insights into investment decisions of the general population.
A further drilling-down of the data by age group indicates that the shift from rental demand to homeownership demand for residential property is mostly prevalent within the younger cohort of respondents. Arguably this suggests that the younger generations are more interested in having a permanent residency rather than renting their residential property. Government incentives and regulatory developments may also be enticing this cohort to opt-out to purchase rather than rent property. Another reason for the drop in renting demand could be the increase in rental prices. According to CBM data, advertised rental prices continued to experience an upward trajectory, which in the CBM’s view would make it unsustainable to rent out property for the long term. The shortage of supply on the market for long let property, driven by the influx of foreign workers coming to Malta, is also causing the price of rent to fluctuate.
The results of the latest survey were benchmarked against the trend registered since 2021 in previous editions of equivalent surveys carried out by PwC which, with the exception of in Q1 of 2023, suggest what could be interpreted as generally consistent patterns in the general population’s investment plans, and hence, the dip in results in connection to rental intentions when compared to Q1 of 2023 can be deemed to be return to the trend observed in previous editions of the survey.
Decrease in sole ownership
This survery also suggests a decrease in respondents that have indicated plans to purchase property as sole owners (Q4 2023: 51%; Q1 2023: 60%). The available affordable options in the housing market for a single person with average earnings are increasingly becoming limited due to the increasing house prices. A study by the Foundation for Affordable Housing notes that the gap between average earnings and house prices has been widening, as house prices have been increasing at a faster rate than the historical long-term average. Prospective buyers are being priced out of the market due to the sustained increase in house prices. The implication is that individuals need to earn more income and save up a larger amount of cash for a deposit, in order to qualify for a mortgage loan. The PPI confirms the increases in price, as both NSO and CBM data register a CAGR of over 5% from 2015 to 2022, implying a strong prolonged increase in residential property prices.
Will you be buying a property alone (sole owner)?
169 responses
234 responses
Arguably, were it not for government intervention or family assistance, it would be an unrealistic prospect for young people in Malta to own property unless they purchase not as sole-owners. Against this backdrop, published statistics indicate that young Maltese people are leaving their parents’ home considerably late when compared to other EU countries. In 2022, the average age of people leaving their parents' home in Malta was 30.1 years compared to a European average of 26.4 years. Furthermore, the study by the Foundation for Affordable Housing also suggests that affordability concerns are not applicable only to young or first-time home buyers but may also impact prospective home buyers that have recently gone through a divorce or separation and renters transitioning into home ownership. Relocation to Gozo may ease the cost burden on a sole proprietor given that prices are lower in that region, however, this would entail commuting drawbacks.
Increased appetite for higher valued property
The survey indicates that the majority of respondents are seeking to buy property valued between the €100k to €200k range (44%). However, when the latest results are benchmarked to the last edition, a shift in demand towards property valued at higher price brackets can be noted. The biggest increase in the share of respondents was seen in the €201k to €400k bracket, where 47% of the respondents suggested appetite towards property within this price bracket, in contrast to 40%, in 2023 Q1 survey.
What is the value of the property you are looking for/can afford?
A consistent message emanates from a connected question which was posed to the participants of this survey - which delved into the reason underlying the prospective property purchase. Despite a lower share (when compared to the 2023 Q1 survey), the main intention for a prospective purchase of property remains to move out of home (first-time buyers), with 43% of respondents. A higher proportion of respondents answered that they want to upgrade their home (Q4 2023: 25%; Q1 2023: 16%), which also implies that they would be looking at higher priced property.
What is the reason for purchasing the property?
More context to such a shift is further articulated in the results to the question which probed into the type of property that respondents are looking to purchase. Respondents have an increased appetite for property types that are on the higher end of the price spectrum. In the previous edition, 83% were looking to purchase an apartment, penthouse or maisonette, whilst the other 17% were looking at town houses, terraced houses, houses of character and villas (deemed to be higher-end properties). In this edition, the proportion of respondents looking to purchase a higher-end property increased to 27%. In the local market, there exists a lack of supply of high-end properties, and with increasing demand for these types of properties, it is expected that prices will keep on being pushed upwards. Furthermore, demand for high-end property is not expected to slow down any time soon, as high-net-worth individuals relocate to Malta, attracted by the economic growth that the country is so far experiencing and the increased foreign investment.
Type of Property
Another reason that might be propelling market players to consider higher valued property, is that their willingness to pay has gone up in order to purchase a property that suffices their needs compared to what they were willing to pay historically.
People have now become more aware of the reality of higher property prices and also of higher inflation rates in the past two years, potentially leading them to adjust their expectations accordingly.
The apparent increased appetite for higher-end property echoes the sentiment being expressed in the local media by real estate stakeholders. This is also supported by the data, whereby the number of final deeds of sale is decreasing whilst the value of final deeds of sale is increasing.
Increased impact of regulatory developments on plans to purchase property
Non first-time buyers were asked if they are aware of the additional restrictions imposed by the Central Bank, namely Directive No.16 which entered into force in 2019 and was updated in 2021. These restrictions relate to the issuance of loans to purchase property for second-time buyers and include the following requirements: repayment of the loan over a period of 25 years or by retirement age, whichever is the earlier; instalments cannot exceed 40% of the applicant’s annual gross income; and 25% of the loaned amount needs to be available by the borrower at the origination of the loan. 76% of respondents who were not first-time buyers were aware of the restrictions imposed by the Central Bank, significantly up from 47% in the previous survey. Out of the respondents who were aware of the restrictions, 66% said that such restrictions did have an impact on their decision to purchase property.
If you are not a first-time home buyer, are you aware of the additional restrictions imposed by the Central Bank on local banks in connection to the issuance of loans to purchase property?
If yes, did they have an impact on your decision to purchase/or not, property?
A further question posed to respondents delved on the influence of 2024 budgetary measures on the sale of property, more specifically, the tax relief on transfer of properties which are vacant, in urban conservative areas (UCA) or which carry traditional features. It was noted that 41% of the respondents answered that these had a significant influence on their decision and plans to buy property, up from 33% in the previous edition. A further 33% said that the budgetary measures did have a slight influence on their decisions and 26% said they had no influence.
To what extent have the budgetary measures affecting the sale of property, namely, the tax relief on transfer of properties which are vacant, in UCA (Urban Conservative Areas) or which have traditional features, recently influenced your decision/plans to buy?
Such findings indicate that people are becoming increasingly aware and sensitive of the regulatory developments in place and are seeking to take the best advantage. Respondents were specifically asked if they feel that there is enough information available in the market for them to make an informed decision when acquiring property and, consistently, the number of respondents who felt that there is enough information available went up from the last run (Q4 2023: 41%; Q1 2023: 31%).
Do you feel there is enough information available in the market for you to make an informed decision when acquiring or renting property?
Consideration of sustainability factors
As the concept of sustainability is becoming increasingly important, respondents were asked to rank how much sustainability factors impact their decision to buy or rent property, ranging from not important at all to very important. This survey registers a remarkable shift in percentage of prospective buyers (Q4 2023: 70%; Q1 2023: 59%) who give weight to sustainability factors in the property purchase decision. When prospective buyers were asked if they would be willing to pay more for a property that is built in a manner to consider sustainability factors, a positive shift was noted. Whereas in the 2023 Q1 survey the majority of respondents, at 54%, had answered that they would not pay more for a property with sustainability considerations, in the last edition, the majority have now tipped over to 59% who state that they would indeed pay more.
How much would sustainability factors impact your decision to buy or rent a property?
294 responses
289 responses
Would you pay more to rent or buy a property that includes sustainability considerations?
294 responses
289 responses
This finding helps to shed light on the fact that the general public is becoming increasingly more aware of the importance of sustainability. In this respect, we believe that further emphasis should be placed on environmentally friendly features that advertised properties can offer. Furthermore, increased awareness is needed on the benefits arising from the purchase of environmentally sustainable properties that can yield potential financial benefits to the buyer in the long run, along with benefits to society as a whole.
Conclusion
This survey has explored key themes surrounding Malta’s property market. Findings are generally in line with the sentiment being expressed publically by real estate stakeholders and also support factual data. An increasing demand for higher-end properties has been registered. The growing expat community is shaping the to-let market, with rental prices increasing substantially as supply fails to meet demand. This implies that there is a potential of growth in the residential buy-to-let market, given the perceived supply shortage, which could potentially also stabilise rental prices. Finally, the survey registers an increasing level of awareness on regulatory developments and an increased appetite for buying and renting eco-friendly properties.
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